06 Feb Inheriting a main residence 

Posted at 23:23h in Uncategorized by

By Sally Beveridge

When a main residence is inherited, it is often connected to the loss of a close relationship. While this is a difficult time emotionally there are still financial details to understand.

At this time, there may be some exemptions to capital gains tax (CGT) to beneficiaries if they sell the property, and certain conditions are met.

1. If the deceased’s property was purchased before 20 September 1985, it will be exempt from CGT in the hands of beneficiary/ies if:

– Sold within 2 years from the date of death, or

– Since the date of death, the property has been occupied by either a surviving spouse, a beneficiary of the deceased’s will, or a person given the right to occupy the residence in accordance with the will.

2. If the property was purchased after 19 September 1985, it will be exempt from CGT in the hands of beneficiary/ies if:

– Not used for income-producing purposes at the time of death

– It was the deceased’s main residence at time of death, and

– Sold within 2 years from the date of death, or

– Since the date of death, the property has been occupied by either a surviving spouse, a beneficiary of the deceased’s will, or a person given the right to occupy the residence in accordance with the will.

Exceptions and further requirements:

– For assets acquired by the deceased on or after 20 September 1985, in order to be CGT exempt, further requirements apply where the dwelling was passed on to the personal representative on or before 7:30 pm on 20 August 1996.

– If the deceased or their beneficiaries are not Australian tax residents, generally the main residence exemption for CGT will not apply and CGT may be payable on disposal

– Where property was purchased prior to 20 September 1985, if substantial improvements or additions were made after this date, there may be a partial post-CGT portion that is subject to CGT

– If the deceased was not an Australian tax resident and/or the main residence is outside Australia, then other considerations may be necessary.

Record Keeping

It is important that the appropriate cost-base records are maintained and on hand for when the property is sold. These will determine the cost base of the property. The types of records will differ depending on pre- or post-CGT and how the property has been used over the period of ownership. At EQ8, we can guide you on record-keeping requirements.

If you have recently inherited a main residence from a deceased estate, have a main residence you would like included in your will or would like to learn more about the CGT impact it may have on your beneficiaries, please contact us.